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Structure of Banking Industry in India

All banks of India can be simply divided into 3 major groups viz. Central Bank (RBI), Scheduled Banks and Non-scheduled Banks. This implies that every bank other than RBI, is either a scheduled bank or a non-scheduled bank.

However, on the basis of functions, there are five broad categories of Banks in India viz. Central Bank (RBI), Commercial Banks, Development Banks (or Development Finance Institutions), Cooperative Banks and Specialized banks.

Scheduled Versus Non-scheduled banks

A bank is called a scheduled bank in India, if it is listed in the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain statutory conditions such as:

  • These banks need to have paid up capital and reserves of at least Rs. 0.5 million (50 Lakh)
  • They should satisfy the CRAR norms and other prudential norms of RBI
  • They should satisfy the RBI that their business is not being conducted in a manner prejudicial to the interests of its depositors.

In our country all banks are scheduled banks except four Local Area Banks and some Non-scheduled Urban Cooperative Banks. As of February 2015, these four local area banks are:

  1. Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh)
  2. Capital Local Area Bank Ltd – Phagwara (Punjab)
  3. Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar (Andhra Pradesh)
  4. Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra)

The scheduled banks are further classified into Scheduled Commercial Banks and Scheduled Cooperative Banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance.

Classification up to this point is displayed in the below graphics.

Different types of Scheduled Commercial Banks

The scheduled commercial banks are those banks which are included in the second schedule of RBI Act 1934 and which carry out the normal business of banking such as accepting deposits, giving out loans and other banking services.

Scheduled Commercial Banks can be further divided into four groups:

  • Public Sector Banks: This includes:
    • SBI & Associates
    • Nationalized Banks
    • Other Public Sector Banks
  • Private Banks
  • Foreign Banks
  • Regional Rural Banks

Number of Scheduled Commercial Banks (Public Sector Banks)

At present, there are 27 Public Sector Banks in India including SBI (and its 5 associates) and 19 nationalized banks. Further, there are two banks which have been categorized by RBI as “Other Public Sector Banks”. IDBI and Bhartiya Mahila Bank come under this category.  The 19 nationalized banks in India  viz. Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce, Punjab & Sind Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India and Vijaya Bank.

Further, there are two scheduled commercial banks in India, which have been classified as “other Public Sector Banks”. These are IDBI and Bhartiya Mahila Bank.

State Bank of India Group

State Bank of India with its around 17,000 branches and around 200 foreign offices, is India’s largest banking and financial services company by assets. With over 2 lakh employees, SBI is banker to millions of Indians. This bank got birth in the British Era. Its first parents were three presidency banks viz. Bank of Calcutta (later Bank of Bengal), Bank of Bombay and the Bank of Madras. In 1921, these three presidency banks were merged in one entity called “Imperial Bank of India”. The Imperial Bank of India was nationalized in 1955 and was renamed a State Bank of India. Thus, State bank of India is the oldest Bank of India.

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